Wednesday, September 29, 2004

WOLF BLITZER: ECONOMIC IGNORAMUS

Don't have the link, but overheard Wolf Blitzer last night on CNN crooning about Bush's leadership in getting the Saudis to pump more oil. This should play well for Bush politically in the election, according to Blitzer's sanguine analysis.

Earth to Wolf: The Saudis are pumping oil because it is selling for +$50/barrel and they stand to make a shit ton of money. It has nothing to do with Bush's diplomatic skills or close ties to the Saudi royal family (although the high prices may be tied to the latter).

This is simple economics. Supply and demand. When the price goes up, suppliers want to sell more. Pretty straight forward. To add a level of complexity, the Saudis are part of a cartel--an agreement to restrict supply and push prices up for optimal profits. When the price goes high enough, individual actors in the cartel have an incentive to cheat (a prisoner's dilemma game) and capitalize on the high prices. It's plain to see why the Saudis would want to sell oil at $50 a barrel rather than at $35.

So not only does Bush not have anything to do with the Saudi's decision to pump oil, but he is fraternizing with despotic cheaters.

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